Follow by Email

Monday, 28 December 2015

Value Pick No. 1: Magni Tech Industries Bhd (TP RM5.40)

Dear fellow traders,

For 2016, I will be sharing some fundamentally sound counters with upside growth progressively through out the next few months. These are just a few of my humble highlights (not recommendation), feel free to have some intellectual discourse on this. To join my telegram channel : https://telegram.me/tradeview101

Quarterly Results (2Q) of Magni announced last week was mind blowing. Magni achieved record quarterly results with a jump of 2.7 times EPS from 7.38 sens to 19.94 sens. It is amazing because although many already knew good results was on the way, most were delighted to know there was special dividend of 3 sens on top of the 5 sens interim dividend. Of course, Magni as a garment manufacturer is a strong beneficiary of the export theme. Weak MYR has allowed Magni to achieve supernormal profit margins. However, the key to their continuing profitability is their tie up with Nike. Look below:

Orders for the Nike brand for the next four months rose 20 percent, excluding the effects of currency. Analysts expected a 13.6 percent gain.

Most export counters has shot up and the price has ran substantially. Magni was among those that went up a lot and even had a bonus. Yet, I chose to put money in Magni because of the increase in profit comes from beyond just the profit margin. Their revenue is also growing which to me shows that even if the share price has went up, there is still more room as it is not only a profit margin play. If you believe in the potential growth of Nike, then dont hesistate to jump in.

Against its peer, Prolexus which is trading at 11.5x PE, Magni is currently trading at 10x at the closing price of RM4.49 Wednesday. I am confident the next Magni is able to maintain their EPS for the next 2Q due to festive seasons cycle as well as the impending Olympic 2016 which will boost sales for Nike sporting products.

The current EPS stands at 22.86 sens for 2 quarters. Taking a forward annualise earnings for 4 quarters amounts to 45.72 sens. At PE 11.5x, the fair value for Magni should be RM5.25 and at PE 14x, the fair value would be RM6.40. In addition, there is also a dividend of 8 sens declared. Conservative individuals can consider multiplying a 10-20% discount. As such, I raise the multiple to x12 and conservatively forecast the full year 2016 EPS at 45 sens, this would bring the FV to RM5.40 which in my opinion is reasonable.

Profile

Specialising in Value Investing and Fundamental Analysis. The philosophy and guiding principle is "Trading With A View". The areas of focus includes equities, forex, property and global economics.
Genuinely believe in investment as the way to achieve financial freedom and sustenance. As a professional in the Corporate Real Estate and M&A industry, was involved in negotiating and closing mega deals. Understand the importance of chasing corporate targets whilst realising the importance of self sustenance. Let us exchange ideas and work towards our financial goals.
Official Website : www.tradeview.my
Telegram Channel : https://telegram.me/tradeview101